Borrowing From Bank Of Mum and Dad

When we’re starting out in our careers, the vast majority of us have to trade our most plentiful resource (time) for our most lacking resource – money. With zero net worth we aren’t able to take advantage of compound interest or investment returns. I remember my first paycheck in August 2012 multiplied my net worth by 15 times!

In contrast, our parents who are in their 40s, 50s and 60s, should’ve had a significant amount of time in their careers for compound interest and investment returns to start working for them, assuming they’ve been playing their cards well.

Obviously if they’re struggling then we should be taking care of them. But what if they’re doing very well and a figure like £20,000 for them is only 1% of their net worth? Should they be helping you? And should you accept their help?

My stance on the topic is that if your parents are financially comfortable and are willing to help you then you should definitely accept their gift with gratitude. There’s little merit in taking a moral high ground, plus bear in mind that we most likely don’t have anyone else on this planet willing to help us unconditionally. £20k to a successful middle aged couple is next to nothing but for a young millennial it means a house deposit and a valuable head start compared to our peers.

We’re taught from an early age to make lemonade from lemons but similarly we should always take full advantage of the fortunate circumstances.

Personally I haven’t had the fortune of receiving any help from my parents but I view it as more of a reason to work harder and smarter than anyone else. Just like some people are born with intelligence or beauty, I was born with curiosity, motivation and the belief I can create the life I want with my bare hands.

Will I act as BOMAD for my own future children? It’s a difficult question. Whilst I’d love for my future children to experience the same financial journey and lessons, I could speed the sometimes painstakingly slow process several-fold. I reckon the best option is to guide them through the learning process for the first few years. Once I’m certain they understand the principles and can succeed on their own, I’ll step in.

Imagine having £100K to your name when you’re born. By the time you reach 30 (having undergone a good financial education) a standard UK all share tracker fund will have grown to over £400K even accounting for inflation!

P.S. I learned everything I know about finance from this book, this book and that oneamongst many others. For a more extensive list, don’t hesitate to drop me a line at rory@ukdoctoronfire.com. If you prefer learning through listening use this link to earn a free audiobook of your choice by signing up to their 30-day free trial. Simply cancel with the click of a button if you decide later on that the service isn’t for you, no questions asked.